FBM KLCI up, led by Sime Darby stocks

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KUALA LUMPUR (Dec 5): The FBM KLCI closed 2.65 points or 0.17% higher today while Bursa Malaysia's palm oil plantation index rose by a significantly larger quantum after crude palm oil (CPO) prices rose past RM2,800 a tonne.

Globally, Malaysian shares tracked Asian equity gains on expectation the US and China may soon seal a phase one deal to end their 17-month trade war.

At Bursa, the KLCI closed up at 1,563.58, led by Sime Darby Bhd and Sime Darby Plantation Bhd share gains.

“On the broader market, we are seeing strong gains in the plantation sector after CPO prices rallied towards the RM2,800 per tonne mark on reports that stockpiles in Malaysia (could have headed) towards a two-year low and production falling to a five-month low in November,” Malacca Securities Sdn Bhd senior analyst Kenneth Leong said.

Across Bursa today, 2.39 billion shares worth RM1.71 billion were traded. Gainers led losers by 529 to 305 respectively.

Among the KLCI's 30 component stocks, Sime Darby Bhd was the top percentage gainer after the stock closed up four sen or 1.74% at RM2.34 followed by Sime Darby Plantation Bhd which closed eight sen or 1.58% higher at RM5.15.

Bursa's palm oil plantation index finished up 645.71 points or 4.62% at 14,626.25 after CPO prices rose to RM2,808 a tonne today. CPO for Feb 2020 rose as much as RM35 to RM2,808 a tonne before paring gains at RM2,799 at 5:14pm.

Genting Plantations Bhd and KLCI component Kuala Lumpur Kepong Bhd (KLK) were among Bursa top gainers. KLK's share price closed up 20 sen or 0.85% at RM23.74.

Public Investment Bank Bhd analyst Chong Hoe Leong wrote in a note on Wednesday (Dec 4) that the research firm is overweight on the Malaysian plantation sector outlook with higher CPO price assumptions.

"Since our upgrade on the sector outlook in early-October, CPO futures have rallied by more than 27% to RM2,760/mt. We believe CPO prices may surpass RM2,800/mt level in the coming months due to tightening CPO supplies in the global markets.

"This will be a boon to all plantation companies after suffering from the poor CPO price performance over the last two years. We revise up our average CPO price assumption to RM2,600/mt (from RM2,400/mt previously). We also rerate the PE multiple for the respective plantation companies under our coverage to reflect the bullish sentiment," Chong said.